ASSOCIATES INTERNATIONAL HOLDINGS CORP v. Tato Trucks Sales, Inc

OCR transcription for search; preserved printed pages are authoritative

Casdt05-00061-BKT Doc#:28 Filed:01/13/06 Entered:01/13/06 08:46:13 Desc: Main

AUTHENTICATED /
U.S. GOVERNMENT
INFORMATION
GPO

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO

IN THE MATTER OF
TATO TRUCK SALES, INC. : CASE NO. 04-12371

DEBTOR : CHAPTER 11

ASSOCIATES INTERNATIONAL
HOLDINGS CORP. D/B/A CITICAPITAL
Adv. Proc. 05-0061

Plaintiff

amor tee § Seamer Tt

; aia

FILED & ENTERED

Vv.

TATO TRUCK SALES, INC.
Defendant JAN 13 2006 ie

a ee ee en |

CLEak
U.S. BANKRUPTCY COURT
BAN JUAN, PUERTO nice

OPINION AND ORDER. 0 0 nee eT
We hereby deny the Parties’ motion and cross motion asking us
to summarily determine the extent of Plaintiff’s lien over
“Inventory” defined in the Security Agreement, for reasons that
Eollow.
Background
Defendant repairs, sells and services heavy machinery and
trucks. To finance its business, it procured a $61.5 million loan
pursuant to the terms and conditions of a Security Agreement. The
parties disagree on the meaning of the “Inventory” serving as
collateral for repayment of the loan, defined in Paragraph A of the
Agreement . On the one hand, the Agreement’s printed format
describes “Inventory” as:
Inventory: The undersigned dealer (“Debtor”) is now or
may hereafter be engaged in the business of selling at
retail the following described types of property and such
other property as may be described from time to time in

any agreement which is supplemental hereto (all of which
property, with all attachments, accessories, exchanges,

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replacement parts, repairs and additions thereto, are
herein collectively called “Inventory”)

On the other hand, the parties typed in the following words in an
attempt to also define the contents of the “Inventory”:

ALL PRESENT AND FUTURE VEHICLES, BOTH NEW AND USED,

INCLUDING BUT NOT LIMITED TO ALL TRUCKS, TRACTORS,

TRAILERS, AND SEMI TRAILERS.

Plaintiff argues Paragraph A shows its security interest
extends to all present and future inventory regardless of whether
the replacement parts are used to service vehicles and heavy
equipment sold by the Debtor under an apparent floor plan with the
Plaintiff, or whether these parts are used to repair vehicles and
heavy equipment not sold by the Debtor under the Agreement.

Debtor claims Plaintiff's security interest extends only to
the inventory of replacement or repair parts of all present and
future vehicles sold or to be sold by the Debtor pursuant to the
Agreement’s apparent floor plan. Hence, there is a portion of
Defendant’s inventory of vehicle parts that is not encumbered by
Plaintiff's lien.

Discussion

Summary judgment is warranted where the record viewed most
favorably to non moving party, reveals that there is no genuine
disgpute as to any material fact and moving party is entitled to

judgment as a matter of law, Celotex Corp. v. Catrett, 477 U.S. 317

(1986). “The summary judgment machinery operates in two phases.
First, the movant must make a preliminary showing that there is no
genuine issue of material fact which requires resolution in the

crucible of a trial. Once this showing has been made, the burden

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shifts to the non-movant to demonstrate, through specific facts,
that a trial worthy issue remains.” (citations omitted} Cadle

Company _v. Hayes, 116 F. 3d 957, 960 (1% Cir. 1997). “For the

purpose of summary judgment, an issue of fact is ‘genuine’ if it
‘may reasonably be resolved in favor of either party.’ (citations
omitted) For the same purpose, ‘material’ facts are those which
possess ‘the capacity to sway the outcome of the litigation under
the applicable law’ .” (citations omitted) Id.

In the context of a summary judgment, a court may interpret a
contract when; (a) its terms are clear, or (b) when any existing
ambiguity is cleared by admissible extrinsic evidence supporting
only one of the conflicting interpretations. See Torres v.
Santiago, 149 F.3d 29 (1%* Cir. 1998); Boston Five Cents Savings
Bank v. Secretary of the Department of Housing and Urban
Development, 768 F.2d 5 (1°° Cir. 1985).

In our view, Paragraph A of the Agreement does not clearly and
unequivocally describe the content of the “Inventory” guaranteeing
repayment of the loan. The parties have not offered extrinsic
evidence that would allow us to resolve the parties’ controversy
without a trial.

Furthermore, under applicable non bankruptcy law, when the
terms of a contract are not clear, the court must look to the

intention of the parties,* including their prior, contemporaneous

1 Article 1233 of the Civil Code of Puerto Rico states: If
the terms of a contract are clear and leave no doubt as to the
intentions of the contracting parties, the literal sense of its
stipulations shall be observed. If the words should appear
contrary to the evident intention of the contracting parties, the

3

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and subsequent actions involving the contract.* The determination
of the parties’ intent is a factual finding which is best determine
after an evidentiary hearing or trial.

Wherefore, the Parties’ motions for summary judgment are
denied. The Clerk shall schedule a pretrial and notify the
parties.

SO ORDERED, in San Juan, Puerto Rico, on January 12, 2006.

ti

5 DE JESUS ~
U.S. Bankruptcy Judge

intention shall prevail. 31 L.P.R.A. §3471

“For Article 1233 purposes, a term is considered ‘clear’
when it is sufficiently lucid to be understood to have one
particular meaning, without room for doubt.”

Fernandez v. Municipality of Bayamén, 942 F.Supp. 89, 94 (D.P.R.
1996} (Citation omitted).

? Article 1234 of the Puerto Rico Civil Code states; In
order to judge as to the intention of the contracting parties,
attention must principally be paid to their acts, contemporaneous
and subsequent to the contract. 31 L.P.R.A §3472